Deal focus: WiL chisels start-up gold from corporate Japan

Those familiar with the cultural divide between the US and Japanese start-up environments typically hold out little hope that a Silicon Valley-style ecosystem will ever emerge in the conservative island nation. Japan has plenty of talented tech-focused entrepreneurs, but venture capital firms targeting the market have to know where to look for them.

For World Innovation Lab (WiL), the start-up successes of Japan's future are already on the payroll at the country's biggest conglomerates. "I see so much opportunity inside Sony, Toyota, Nissan and big companies with heavily funded R&D facilities," says Gen Isayama, WiL's co-founder and CEO. "There're so many great ideas and technologies, yet a lot of them are just sitting on the shelf, waiting for someone to pick them up. That's where we come in."

This was the thesis behind WiL's participation in a JPY2.4 billion ($22 million) Series B round for Soracom, a Japanese software developer that provides internet-of-things (IoT) companies with a platform for managing their online-connected products. As the company looks to expand across the US, Europe and Asia. WiL will offer support through its global network.

The Japan-US venture firm identified Soracom's potential last year when the company was developing its technology under the wing of mobile giant NTT Docomo. It participated in a $6 million Series A alongside Infinity Venture Partners - which also returned for the Series B - and quickly set about transforming the NTT spin-out into an independent start-up, albeit with powerful built-in connections.

WiL management and Soracom's founders already had a longstanding friendships when the new company began fleshing out its business model during a six-month incubation tenure in WiL's Tokyo offices. Well before the Series B round, however, the company had already expanded to more than 20 employees and it was time to move out.

This approach to launching a start-up has proven to be a rapid means of attracting international attention to Japanese entrepreneurialism. In less than a year, Soracom has accumulated more than 2,000 corporate clients worldwide and entertained comparisons to US-based Jasper Technologies, a fellow IoT services player which was acquired by Cisco Systems in February for $1.4 billion.

Soracom hopes to leverage an early-mover advantage in the IoT infrastructure space by offering streamlined and cost-effective monitoring systems before growth projections for the ownership of multiple mobile devices unfold. The company is in partnership negotiations with a number of global mobile carriers, and agreements are expected to be disclosed within weeks. As these relationships develop, product enhancement rollouts will be advanced with continuous ties to NTT.

"It'll be interesting to see how a start-up working closely with a big company can truly compete with global players," Isayama says. "That's what this funding means for this company - they have to really go tactfully after global markets. Obviously, there aren't yet many Japanese companies that are globally successful as start-ups."

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• Topics
• North Asia
• Early-stage
• Technology
• Japan
• World Innovation Lab (WiL)
• Venture